Concluding remarks by the Chairperson

1. This fourth Trade Policy Review of India has greatly improved our understanding of India's trade and trade-related policies and the challenges it faces in sustaining, and indeed improving, its economic growth. I thank Secretary Pillai and his delegation, the Discussant, Ambassador Eckart Guth of the European Communities, and Members of the TPRB for contributing to our fruitful exchange of views. India's response to the large number of questions is also greatly appreciated.

2. Members all agreed that India's economic performance had been impressive, with GDP growth averaging over 7% between 2001/02 (fiscal year, April-March) and 2006/07; growth has been particularly rapid since 2003, averaging over 8.5% and has translated into improved social indicators, including a reduction in the percentage of the population living below the poverty line. They attributed this impressive performance mainly to structural reforms, including unilateral trade liberalization, such as reductions in applied tariffs.

3. Nevertheless, they noted that continued economic reforms, particularly further trade liberalization and measures to address infrastructure bottlenecks, would be required to meet the longer term goal of annual growth of between 8% and 10%. There was concern that India's relatively low tax-to-GDP ratio was seemingly insufficient to meet its developmental needs. It was also pointed out that privatization of SOEs would have to resume as loss-making SOEs remained a considerable budgetary burden. Given that public spending was constrained by the Government's fiscal position, they suggested that FDI could be an alternative source of investment in infrastructure, thereby contributing to India's economic growth. However, although FDI has been rising, it has not met expectations, implying that barriers to FDI need to be addressed.

4. Members commended India's tariff reform, noting that the average applied MFN tariff had been cut by half, from 32.3% in 2001/02 to 15.8% in 2006/07. The tariff, nevertheless, remained relatively high, especially for agricultural products, at 40.8%. Moreover, the significant gap between the applied and bound tariff rates, as well as the considerable number of unbound lines in its tariff schedule, provides the Indian authorities with considerable scope to raise tariffs, thereby contributing to its unpredictability. Some Members also remarked on the lack of an official comprehensive and easily accessible publication containing applied tariffs and other charges, as well as the numerous tariff exemptions announced throughout the year that complicated the tariff structure.

5. While import tariffs had declined, the export regime remained highly complex, partly as a consequence of various measures to neutralize duties levied on imported inputs used in exports; export processing zones and special economic zones also offer tax holidays to investors. Some Members urged India to consider whether across-the-board import duty reductions would be more beneficial than selective duty exemptions.

6. India's active role in the multilateral trading system was commended, and Members encouraged it to continue to show leadership in bringing the Doha Round to a successful conclusion. They also noted India's involvement in regional trade agreements. Some Members encouraged India to adopt an ambitious preferential trade regime, offering least-developed countries better preferential access to its market.

7. India remained a major user of anti-dumping measures, although the number of investigations and measures in force had been declining. Members urged India to exercise maximum restraint in initiating anti-dumping and safeguard actions and in imposing such measures. While applauding reforms in government procurement, some Members encouraged India to consider becoming an observer to the Agreement on Government Procurement, leading to its eventual accession to the Agreement; this would show India's increased willingness to open its public sector to competition.

8. Members commended India for taking steps to align its national standards with international norms. They expressed concerns on SPS, but welcomed measures adopted to streamline SPS procedures. They also noted that alignment of standards and SPS measures with international practices could improve the trading environment. Strengthening of the IPR regime was also urged. Some Members expressed their appreciation of the new Patent Act introduced in 2005, and considered that effective implementation of IPR related legislation would be in the interest of India itself.

9. Members noted continued government intervention in agriculture, through inter alia high tariffs, price support and direct subsidies to inputs. Moreover, agricultural growth remained slow and erratic, causing considerable distress, especially among small and marginal farmers. Some concerns were expressed about the development of the manufacturing sector, which was being held back by the complex customs duty structure, as well as the relatively high tariffs in textiles and clothing, and automobiles. Members remarked on the superior performance of India's services sector, where liberalization has been most rapid. Nonetheless, some noted that reforms in services had been uneven and limited in scope, and foreign investment restrictions remained. They were also concerned that inadequate infrastructure, particularly in transport and electricity, remained a major bottleneck.

10. This Review has been very informative and has given a useful overview of India's trade policies and practices and the challenges it faces.  I would once again like to thank the Indian delegation, the discussant, and Members for contributing to a very enlightening two days of discussions.  We look forward to receiving India's responses to outstanding written questions within the next month.